Dy. Commissioner of Income Tax , Circle-2(1), Hyderabad V. Koya and Company Construction Limited, Hyderabad

ITA 867/Hyd/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 2668 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 07-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 867 /HYD/ 2018 ASSESSMENT YEAR: 20 14 - 15 DCIT, CIRCLE - 2(1), HYDERABAD. VS. KOYA AND COMPANY CONSTRUCTION LIMITED, HYDERABAD. PAN: AACCK 3240 R (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI K.C. DEVDAS REVENUE BY: SMT. ALKA RAJVANSHI JAIN, CIT - DR DATE OF HEARING: 26 .09.2018 DATE OF PRONOUNCEMENT: 10.10 .2018 ORDER PER SMT. P. MADHAVI DEVI, J.M.: THIS IS REVENUES APPEAL FOR THE ASSESSMENT YEAR 2014 - 15 FILED AGAINST THE ORDER OF CIT(A) - 2, HYDERABAD DATED 22.02.2018. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE CIT(A) IS CORRECT IN LAW IN ALLOWING THE DEDUCTION U/S 80IA WHEN THE ASSESSEE WAS A MERE EXECUTOR OF THE GOVERNMENT CONTRACT BUT NOT DEVELOPER OF THE PROJECT BUT WHICH IS PRE - REQUISITE FOR CLAIMING DEDUCTION U/S 80IA( 4) OF THE I.T. ACT? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE CIT(A) IS CORRECT IN LAW IN HIS INTERPRETATION OF THE PROVISIONS OF SECTION 80IA(4) OF THE I.T. ACT, SO AS TO ENABLE EVEN BUILDERS AND WORKS CONTRACTS TO AVAIL THE BENEF ITS THAT FLOW THERE FROM? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE CIT(A) IS CORRECT IN LAW IN IGNORING THE SPECIFIC 2 FINDINGS OF THE ASSESSING OFFICER THAT DIS - ENTITLE THE ASSESSEE FOR RELIEF U/S 80IA OF THE I.T. ACT? 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY , ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION WORKS, FILED ITS RETURN OF INCOME FOR THE A.Y. 2014 - 15 ON 30.11.2014 ADMITTING A TOTAL INCOME OF RS. 19,25,63,250/ - . DURING THE ASSESSMENT PR O CEEDINGS U/S 143(3) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE CLAIMED DEDUCTION U/S 80IA OF RS. 19,91,79,172/ - FOR 8 PROJECTS. HE OBSERVED THAT THE ASSESSEES CLAIM WAS THAT THE ASSESSEE - COMPANY HAS BEEN ALLOTTED THE WORK OF DEVELOPMENT OF INFRASTRU CTURE BY GOVERNMENT AND THE SAME HAS BEEN HANDED OVER TO THE GOVERNMENT AND THEREFORE , IT IS ELIGIBLE FOR DEDUCTION UNDER CHAPTER - VIA OF THE ACT. THE A.O. HOWEVER OBSERVED THAT A DEDUCTION U/S 80IA IS ALLOWABLE ONLY TO AN ASSESSEE WHERE THE INFRASTRUCTURE FACILITY IS OWNED BY A COMPANY REGISTERED IN INDIA AND HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY AND IT IS FOR DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY. HE OBSERVED THAT D URING THE RELEVANT FINANCIAL YEAR , THE ASSESSEE HAS UNDERTAKEN 8 PROJECTS AND ACCORDING TO HIM, NONE OF THESE PROJECTS WERE CONCEIVED, DESIGNED, CONSTRUCTED AND OPERATED BY THE ASSESSEE AND THAT THESE ARE THE PROJECTS UNDERTAKEN BY VARIOUS GOVERNMENT AUTHORITIES WHO HAD FLOATED TENDERS TO EXECUTE SEPARATE PART S OF THEIR PROJECTS AND THE ASSESSEE IS THEREFORE NOT A DEVELOPER AND THAT IT HAS ALSO NOT MAINTAINED AN D OPERATED THE INFRASTRUCTURE FACILITY. THERE FORE, A.O. HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT AND BROUGHT IT TO TAX. 3 3. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME BY FOLLOWING THE DECISION OF THE ITAT IN THE ASSESSEES OWN CASE FOR THE A.YS 2003 - 04 TO 2006 - 07 WHEREIN THE TRIBUNAL HAD HELD THAT THE ASSESSEE CANNOT BE DENIED DEDUCTION U/S 80IA OF THE ACT IF THE CONTRACT INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE , FINANCIAL INVOLVEMENT AND DEFECT CORRECTION OF AN INFRASTRUCTURE FA CILITY, DURING THE LIABILITY PERIOD AND THEY CANNOT BE CALLED AS SIMPLE WORK CONTRACTS. CIT(A) FURTHER OBSERVED THAT THE ITAT HAD FURTHER DIRECTED THE A.O. TO SEGREGATE THE CONTRACTS WHICH CONTAIN SUCH FEATURES , AND GRANTED DEDUCTION U/S 80IA AND THAT THE DEPARTMENT HAS FILED APPEAL S AGAINST THE ORDERS OF ITAT BEFORE THE HONBLE HIGH COURT OF ANDHRA PRADESH AND SUCH APPEALS ARE PENDING. HE OBSERVED THAT IN ORDER TO KEEP THE ISSUE ALIVE, THE A.O. HAS DIS ALLOWED THE C LAIM OF DEDUCTION U/S 80IA OF THE ACT. THUS, AFTER OBSERVING AND EXAMINING THE NATURE OF CONTRACTS, CIT(A) CAME TO THE CONCLUSION THAT THE 8 PROJECTS UNDERTAKEN BY THE ASSESSEE DURING THE RELEVANT FINANCIAL YEAR ARE NOT MERE WORKS CONTRACTS . RELEVANT PAR AS OF THE CIT(A) ORDER ARE AS UNDER: - 5. I HAVE CAREFULLY CONSIDERED THE ISSUE AND THE SUBMISSIONS MADE BY THE AR. FROM THE DETAILS FURNISHED BY THE APPELLANT, IT IS EVIDENT THAT THE APPELLANT IS CLAIMING DEDUCTION U/S.80IA IN RESPECT OF ONLY 8 PROJECTS OUT OF TOTAL 57 PROJECTS EXECUTED DURING THE YEAR UNDER CONSIDERATION. OUT OF TOTAL TURNOVER OF RS.514.02 CRORES, 8 PROJECTS HAVING A TURNOVER OF RS.349.26 CRORES WERE CLAIMED TO BE ELIGIBLE PROJECTS FOR CLAIMING DEDUCTION U/S.80IA(4) OF THE ACT. IT IS SEEN FROM THE TABULAR FORM GIVEN BY THE AO IN PARA - 3.2 OF THE ASSESSMENT ORDER ITSELF THAT THE SAID 8 PROJECTS ON WHICH DEDUCTION U/S.80IA(4) CLAIMED ARE NOT MERE WORKS CONTRACTS. THESE PROJECTS, INTER ALIA INCLUDE MANUFACTURING AND SUPPLY OF PIPES, L AYING, JOINTING, TESTING AND COMMISSIONING OF THE PIPELINES FOR WATER SUPPLY PROJECTS, OPERATION AND MAINTENANCE OF THE SAID WATER SUPPLY SCHEME FOR A PERIOD OF 2 YEARS AND DEFECT LIABILITY OF 24 MONTHS FROM THE DATE OF COMPLETION OF THE PROJECT. IT IS EVI DENT FROM THE ABOVE ITSELF THAT THE SAID 8 PROJECTS ARE NOT 4 MERE WORKS CONTRACTS. IT IS FURTHER EVIDENT FROM THE TABULAR DETAILS OF EACH PROJECT GIVEN BY THE APPELLANT BY QUOTING THE RELEVANT CLAUSES OF THE CONTRACT EXECUTED WITH GOVERNMENT AGENCIES, AS PR ODUCED AT PARA 4.2 ABOVE THAT THE SAID CONTRACTS ARE NOT WORKS CONTRACTS BUT THEY ARE ELIGIBLE CONTRACTS FOR THE CLAIM OF DEDUCTION U/S.80IA(4) OF THE ACT. FROM THE DETAILS FURNISHED BY THE APPELLANT, IT IS EVIDENT THAT THEY SATISFY THE STIPULATIONS LAID D OWN FOR THE CLAIM OF DEDUCTION U/S.80IA(4) BY THE HON'BLE !TAT IN THE CASE OF APPELLANT FOR THE AYS 2003 - 04 TO 2006 - 07 VIDE ORDER DATED 22.03.2012 AS UNDER: - 1. DEVELOPMENT OF WATER SUPPLY/ IRRIGATION PIPELINE SCHEMES; 2. OPERATION AND MAINTENANCE OF THE SCHEME FOR 12 TO 24 MONTHS; 3. RISK DURING DEFECTS LIABILITY PERIOD; 4. FINANCIAL INVOLVEMENT. 5.1 THE AO, HOWEVER, IGNORING THE CONTENTIONS OF THE APPELLANT AND WITHOUT EXAMINING THE CONTRACTS IN TERMS OF THE STIPUL ATIONS LAID DOWN BY HON'BLE ITAT IN THE ORDER DT. 22.03.2012, ERRONEOUSLY CONCLUDED THAT THE APPELLANT IS ONLY INVOLVED IN EXECUTION OF WORKS CONTRACTS AND NOT IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES. IT IS APPARENT FROM PARA - 3.3 OF THE ASSESSMENT ORDE R THAT THE AO, WITHOUT EXAMINING THE CLAIM PROPERLY, WAS DETERMINED TO DISALLOW THE CLAIM TO MAINTAIN CONSISTENCY WITH THE STAND OF THE DEPARTMENT AND TO KEEP THE ISSUE ALIVE, IN VIEW OF THE APPEAL FILED IN THE EARLIER YEARS IN THE HIGH COURT. 5.2 IN VIE W OF THE FOREGOING, I AM OF THE CONSIDERED OPINION, HAVING REGARD TO THE NATURE OF PROJECTS BEING EXECUTED BY THE APPELLANT AND THE FULFILMENT OF THE STIPULATIONS LAID DOWN BY THE HON'BLE ITAT IN ITS OWN CASE FOR THE AYS 2003 - 04 TO 2006 - 07, THAT IT IS ELIG IBLE FOR DEDUCTION U/S 80IA IN RESPECT OF 8 PROJECTS ON WHICH CLAIM WAS MADE. 3.1. THUS, THE APPEAL OF THE ASSESSEE WAS ALLOWED AND THE REVENUE IS IN APPEAL BEFORE US. 4. LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE A.O. , WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND HAD ALSO BROUGHT TO OUR NOTICE THAT PURSUA NT TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2006 - 07, CIT(A) HAS PASSED AN ORDER AFTER VERIFYING THE NATURE O F THE PROJECTS AND SEGREGATING THEM AND 5 THAT THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL AND THUS THE ORDER OF THE CIT(A) HAS BECOME FINAL. HE SUBMITTED THAT THE CIT(A) THEREFORE, ON THE ASSESSEES APPEAL FOR THE A.Y. 2014 - 15, HAS FOLLOWED TH E ORDER OF THE ITAT IN THE ASSESSEES OWN CASE AND AFTER CONSIDERING THE NATURE OF CONTRACTS HAS HELD THAT THE PROJECTS ARE NOT MERE WORK CONTRACTS AND THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 5. HAVING REGARD TO THE RIVAL CONTENTI ONS AND THE MATERIAL ON RECORD , WE FIND THAT THE ORDER OF THE CIT(A) FOR THE A.Y. 2006 - 07 CONSEQUENT TO REMITT ANCE BY THE TRIBUNAL HAS BECOME FINAL AND THE REVENUE HAS NOT FILED ANY APPEAL BEFORE THE TRIBUNAL. WE ALSO FIND THAT THE CIT(A) FOR THE A.Y. 201 4 - 15 HAS VERIFIED THE NATURE OF CON TRACTS BEFORE HOLDING THAT THEY ARE NOT MERE WORKS CONTRACTS. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS IN CONSONANCE WITH THE DIRECTIONS OF THE ITAT IN THE EARLIER YEARS. ACCORDINGL Y, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER , 2018. SD/ - SD/ - (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 10 TH OCTOBER , 2018 OKK COPY TO: - 1) M/S. KOYA AND COMPANY CONSTRUCTION LIMITED, 12 - 2 - 831/38/72 MIGH, MEHDIPATNAM, HYDERABAD - 028. 6 2) DCIT, CIRCLE - 2(1), 5 TH FLOOR, ROOM NO.514, SIGNATURE TOWERS, KONDAPUR, HYDERABAD. 3) THE CIT(A) - 2 , HYDERABAD 4) THE PR. CIT - 2 , HYDERABAD 5) THE DR, ITAT, HYDERABAD 6) GUARD FILE